• Gold prices tumble as persistent inflation and rising oil prices stoke expectations of higher U.S. interest rates.
  • Spot bullion hits $3,908.13 an ounce, marking its lowest level since mid-July and a second monthly decline.
  • Markets price a 75% chance of a December Fed rate hike, dimming the appeal of non-yielding assets.

Sharp Intraday Plunge

Spot gold extended its slide on Thursday, plunging 3% to $3,908.13 per ounce as investors fled the metal amid mounting fears that stubborn inflation and elevated energy costs will force the Federal Reserve to keep interest rates higher for longer—or even tighten further. The move underscores a swift reversal in sentiment for an asset traditionally viewed as a hedge against inflation and geopolitical turmoil.

By mid-morning in New York, the sell-off had accelerated, with a separate live feed showing spot gold at $3,903.99, down 2.89%, broadly corroborating the scale and timing of the decline. Earlier in the session, Reuters (TRI) reported spot gold down 1% at $3,980.40 and December futures off 1% at $3,991.10, illustrating how losses deepened as the morning progressed. The intraday weakness puts bullion on course for a second consecutive monthly decline, following a roughly 4% weekly loss in late October—its worst week in about four months.

The catalyst: a combination of stronger-than-expected U.S. economic growth, accelerating September inflation, and a relentless climb in crude oil prices. “The market is repricing the entire interest-rate trajectory,” said Giovanni Staunovo, an analyst at UBS (UBS), according to people familiar with the matter. “Gold pays no yield, so when rate expectations rise, the opportunity cost of holding it becomes too high to ignore.”

Rate Expectations Weigh

Markets were pricing approximately a 75% probability of a December rate increase in early trading on Thursday, according to futures data—a sharp shift from just weeks ago when policymakers signaled a pause. The Federal Reserve and European Central Bank both held rates steady this week but continued to warn about inflation risks stemming from energy costs, leaving the door open for further tightening. A firmer dollar has compounded the pressure, making dollar-denominated bullion more expensive for buyers using other currencies.

The geopolitical backdrop has offered little support. An attack on a tanker in the Strait of Hormuz underscored supply risks linked to the U.S.-Israeli war on Iran, pushing oil toward a fourth consecutive monthly gain. While such disruptions typically bolster gold’s safe-haven appeal, the inflation implications are currently dominating. Higher energy prices feed directly into headline inflation, reinforcing the case for tighter monetary policy.

Mixed Signals for Demand

Lower bullion prices could provide some relief for jewellery buyers, though local premiums and fabrication charges limit the pass-through. In India, 24-carat gold quoted at ₹142,260 per 10 grams in Mumbai on Thursday, down ₹1,690 from the previous session, excluding taxes and making charges. The World Gold Council’s July outlook noted that high prices had been a drag on jewellery volumes, and a single-day decline is unlikely to spark a demand recovery.

Central banks, meanwhile, remain a wildcard. The World Gold Council expects continued substantial official-sector buying in 2026, albeit below the record pace of 2025, as reserve managers diversify away from dollar-denominated assets. That structural demand could provide a cushion once the current rate-driven sell-off abates.

What to Watch

The $3,900 level is now a key technical reference. In late October, an analyst warned that a break below that threshold could open the way for a test of $3,800—a conditional assessment, not a guaranteed floor. For now, the market’s focus remains squarely on oil prices, U.S. inflation data, and the dollar, all of which will shape expectations for the Fed’s December decision. Should inflation show signs of cooling, the pressure on gold could ease; should it persist, the metal’s role as an inflation hedge may remain tested in the near term.

UBS’s Staunovo, however, sees a brighter longer-term picture: “If inflation subsides and the Fed eventually resumes cutting rates, gold could reach $5,000 or more next year.” That forecast, of course, depends on a reversal of the very forces currently weighing on the market.